Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/192659
Authors: 
Storrøsten, Halvor Briseid
Year of Publication: 
2012
Series/Report no.: 
Discussion Papers 677
Abstract: 
This paper shows that tradable emissions permits and an emissions tax affect the firms' technology choice differently under uncertainty. A tax encourages the most flexible technology if and only if stochastic costs and the equilibrium permit price have sufficiently strong positive covariance, compared with the variance in consumer demand for the good produced. Moreover, the firms' technology choices are socially optimal under tradable emissions permits, but not under an emissions tax. Hence, modeling endogenous technology choice provides an argument in favor of tradable emissions permits as compared with emissions taxes.
Subjects: 
Regulation
Technology choice
Welfare
Uncertainty
Investment.
JEL: 
H23
Q55
Q58
Document Type: 
Working Paper
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